HR and finance haven't exactly had the warmest and fuzziest of
relationships in the past, but the latest evidence suggests the two functions
need each other more than ever today -- and that interdependence is likely to
grow in the future.

By Andrew R. McIlvaine

Thursday, August 1, 2013

Finance
departments today are under enormous pressure to change. Much of the work they've
traditionally done has been outsourced, commoditized or automated. Now they're
expected to partner with the business, helping their organizations achieve
their strategic goals while using data in innovative ways to deliver more
value-added services. Yet many finance leaders find themselves stuck, unable to
draw in the type of talent they need and unsure of how to get there.

Finance
and HR are both finding that the roles they've traditionally played are becoming
obsolete. Both functions need new skillsets and capabilities to meet the more
strategic responsibilities that today's companies are placing before them. A
pair of new studies suggests they'll have a better chance of doing so if they
work together instead of separately.

Deloitte
Consulting's just-released 2013 Global Finance Talent Survey reveals
that while CFOs and other finance executives consider talent management vital,
nearly four in 10 say they are "barely able" or "unable" to
find the talent they need to manage their organizations, while 33 percent
expect they'll face the same problem three years from now.

Only
40 percent of the 312 finance executives surveyed reported finding highly
skilled finance leaders internally in the last three years, especially in Asia
and Europe. Thirty-four percent of respondents cited talent management as their
top concern in their overall finance strategy. The respondents listed as the
top three barriers to successful recruitment the belief that finance offers insufficient
opportunities for career development and advancement; that potential strong
recruits continue to be lured by managerial or non-finance positions instead;
and the fact that compensation and benefits are not competitive.

What's
holding finance back in this respect is a lingering, outdated view of a career
in finance that simply doesn't jibe with today's reality, says Tina Witney, New
York-based Deloitte Consulting's U.S. human capital leader for finance
transformation. Jobs in today's finance departments are often challenging and
interesting, she says, offering recruits the potential to help shape the
company's business strategy.

Unfortunately,
many finance leaders haven't proven very adept at getting the word out and
drawing in candidates who are up to this -- and that's where HR can help, says
Witney, who works extensively with finance departments on talent development.

"I
think there are big opportunities for HR in two areas: One, really helping to
build capabilities within the finance function in leadership and technical
areas, and two, to also help with talent assessment," she says. "In
the past, finance hasn't focused much on competencies and career pathing, and
that's where HR can really step in."

Finance
is being forced to focus on these areas now because "what the business is
demanding of finance as a function is requiring them to operate in a different
way," says Witney. "In the past, they were focused on accounting,
treasury and taxes; now that's shifting to data analytics, planning and
analysis and business partnering. Those factors require different capabilities
from the individuals who work in finance."

HR
and finance executives appear to agree on many people- and performance-related
issues, but diverge in terms of how broadly and rapidly increased collaboration
will occur. That's according to a new survey of HR and finance executives by
Towers Watson and Forbes Insight.

Interestingly,
there was a big divergence between the two functions concerning the question of
whether there will be more collaboration between HR and finance in the next
three years. While both groups agreed it will become more common, 70 percent of
HR respondents thought so, while only 49 percent of finance respondents did.

"The
gap is probably attributable to the fact that HR has a better understanding
than finance of how changes that are made to reward programs, training and
performance management can affect business outcomes and, therefore, how
important it is to get finance onboard," says Emmet Seaborn, a
director at Towers Watson in Stamford, Conn. "They see how critical it is
to connect to those things that finance owns."

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Yet,
for a solid partnership to exist between the two functions, the HR department
itself needs to be at a certain level of maturity, says Witney. An HR function
that already has a business partner dedicated to the finance function will, of
course, be better positioned than one that does not, she says.

Seaborn
says he expected Towers Watson's survey to show that finance was much more
focused on the cost of programs while HR was more focused on performance, but
it turns out both functions are focused on driving business results and growth
while helping their organization manage costs and risks.

"HR
and finance are also saying they need to find much better ways to collaborate,
and HR is saying they need more help from finance in accomplishing their
agenda," he says.

When
finance and HR work together to solve a problem, the result is often more
robust than if each department worked separately, says Seaborn.

He
and his team at Towers Watson worked recently with a large North American
manufacturing company that was struggling to manage total-rewards costs that
were "off the charts" compared to its peers, many of which had made
big changes to their own total rewards programs.

Initially,
HR and finance worked separately to try and address the issues. However, the
business leaders were concerned that little alignment existed between the
company's benefits and reward programs and "impactful results," while
the finance department's focus on "balanced scorecards" wasn't
helpful because there were no mechanisms in place to ensure employees were
focused on those metrics, says Seaborn.

By
working together, HR and finance came up with changes that resulted in
significant changes to the company's total-rewards program and a stronger link
between its performance-management processes and the balanced scorecards, he
says.

"This
organization ended up with hugely different outcomes than if HR had
continued to operate in its traditional domain," says Seaborn.

As
human capital management becomes more data-driven -- "less of an art, more
of a science," he says -- there will be greater interaction between HR and
finance in order to leverage each department's respective strengths.

"We're
really starting to see a blending, a morphing and a breakdown of the silos that
were previously there," says Seaborn.